Asian stocks rise on optimism over US debt talks

HONG KONG: Asian markets broadly rose on Tuesday as US lawmakers near a budget deal to reopen the government and raise the country’s borrowing limit to avoid a catastrophic default.

With just days to go before Washington runs out of cash to pay its bills, Republicans and Democrats said that they were close to an agreement to end a stand-off that has shut the government for two weeks.

After weeks of bickering between the two sides, Senate Majority leader Harry Reid and his Republican opposite Mitch McConnell conducted low-key talks they said had finally borne fruit

“I’m very optimistic we will reach an agreement that’s reasonable in nature this week to reopen the government, pay the nation’s bills and begin long-term negotiations to put our country on sound fiscal footing,” Reid said.

While expectations have been for a deal to be made—equities have remained buoyant despite the gridlock—the news will come as a relief because a US default would send global markets tumbling and likely spark another worldwide recession.

“It’s not like the US can’t afford to pay its bills, it’s more like its wife has just hidden its chequebook,” said CLSA equity strategist Nicholas Smith.

“Most fund managers appear to be more frightened of being left behind if the market [surges]than of the apocalyptic scenario of failing to fix the debt ceiling on time,” he added.

Despite the growing hopes for a breakthrough soon, the dollar slipped as investors look past the debt crisis and to the Federal Reserve’s next move on its stimulus.

With fiscal dove Janet Yellen nominated to take over as chairman of the central bank, investors expect the bond-buying scheme to be kept in place a little longer, keeping downward pressure on the dollar.

The greenback bought 98.40 yen in afternoon trade, against 98.67 yen in New York City on Monday, while the euro fetched $1.3567 and 133.51 yen compared with $1.3559 and 133.79 yen.